On Friday, Citi adjusted its price target for Daimler Truck Holding AG (DTG:GR) (OTC: DTRUY) shares, lowering it to €45.00 from €47.00, while retaining a Buy rating on the stock.
The revision follows the company's second-quarter earnings report and updated outlook, which aligned closely with expectations, including a high-single-digit earnings reduction in line with the market consensus.
The stock exhibited weakness leading up to the results announcement, closing down but less so than the earnings downgrade. Analysts highlighted the underlying strength in the company's numbers after accounting for joint venture impairments and pointed to a solid message regarding the normalization of the truck cycle during the earnings call, rather than a downturn.
For the fiscal years 2025 and 2026, earnings per share (EPS) forecasts were further decreased by 6.1% and 3.4%, respectively. The new projections now sit more than 20% below the 2025 Street EPS estimates, suggesting that the market may still hold overly optimistic views on growth and margins into 2025. This is attributed to a U-shaped cycle and price-cost normalization that Citi believes are not fully accounted for in the Street's forecasts.
However, for fiscal year 2024, Citi slightly increased EPS estimates by 2.4%, reflecting better underlying trading in the Truck Asia and Buses segments. The forecasts for Mercedes-Benz (OTC:MBGAF) (MB) and Trucks North America (TN) in fiscal year 2024 remain largely unchanged, with potential downside risks anticipated for the third-quarter MB margin.
Citi continues to view Daimler Truck as a strong self-help story, yet the firm suggests that a reset of Street expectations for 2025 is necessary before taking a more constructive stance on the long-term investment case for the company.
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